Archive for December 2013

Maximize Your Credit Score & Maximize Your Interest Savings

Life is defined by numbers. Think about it. You have a lucky number. Sports analysts closely monitor statistics to predict winners. Most colleges require a minimum GPA for students seeking admission. And long ago, our country began issuing everyone 9 digit identification numbers (after all, more than likely there are at least several people out of 300 Million who share your first and last name).

Credit Scores are relied on heavily to determine future risk of default. Those with lower credit scores will statistically be more likely to fall behind on payments. Whether you are applying for a mortgage, auto loan, credit card, personal loan or student loan, your credit score will weigh heavily in the lender’s credit decision. There are 3 credit bureaus, Equifax, Experian & Transunion, and some lenders will request a single bureau report and some will request a “tri-merged” report.

Mortgage underwriting requires a “tri-merged” report, and the middle score will be utilized for underwriting purposes, as well as interest rate pricing. Today, I pulled a tri-merged report for a 1st time buyer, and the scores were 764, 776 and 773. The buyer’s mid-score is a 773 – a very good score by the way.

Credit scores range from 350 – 850, with 850 being the highest. I have been in the mortgage industry since 1995, and I cannot recall ever pulling a report below 400 (you really need to do a lot of damage to get below 500). I seldom see scores over 800; I estimate out of 100 reports, less than 10% have scores of 800 or better.

Since 1995, I’ve easily reviewed more than 3,000 credit reports, and I want everyone to learn what I have so they can maximize their credit scores.

Step 1: Pay your bills on time. Auto-Pays through your bank, or creditors, can be helpful with this. Or just do it the old-fashioned way, and grab a Sharpie, and mark your calendar for bill due dates.

Step 2: Keep your revolving (credit card) balances low. Try your best not to exceed 30% of your credit limit. Once you cross that 30% threshold, your credit scores will typically decrease. If you max-out a credit card, you could see a 20 point drop or more.

Step 3: Do not – I repeat – do not close an account until it is paid-in-full. I see this all too often on credit reports. Some have told me they closed the account due to a dispute with the creditor. Trust me, you are not hurting the creditor, since you still owe the money, and will stay pay interest on it.

Step 4: Pay those doctor, dentist and hospital bills. Failure to pay these bills will often result in collections. Medical collections are the most common collections on credit reports. If you have questions regarding a medical bill, call the service provider, and then call your insurance company to find out whether it is your responsibility.

Step 5: If you are an authorized user on a credit card, and the account is not in good standing, have yourself removed from the account. The account owner can contact the creditor and request them to do so.

Step 6: Pay more than the minimum payment due on your accounts. If you pay just the minimum each month, not only will you spend more on interest, you could harm your credit score.

Step 7: Sign up for Credit Monitoring with Equifax, Experian or Transunion. For the cost of about $.50 per day, you can have access to tri-merged credit monitoring. I use myself, and I get a text and e-mail alert anytime there is a change to my credit report (new account, balance increases/decreases, credit inquiries).

The best credit scores = the best interest rates. Utilize these tips to save yourself big money on your home, car, credit card and personal loans.


Market Momentum Carries Over Into New Year

Consumer confidence has rebounded since October’s government shutdown and should continue to strengthen in 2014 as fiscal and monetary policy issues begin to clear. According to Fannie Mae’s Economic & Strategic Research Group, the improvement should lead to gains in consumer spending, manufacturing activity, and economic growth – all of which will contribute to the housing market’s continued recovery. Doug Duncan, Fannie Mae’s chief economist, said housing will continue on a modest upward trend toward more normal levels in 2014, with additional home price increases tempered by declining investor activity in the market. Duncan said housing indicators met the group’s expectations for 2013 and should continue their gradual march toward normal in the new year. More here.

New Home Sales Beat Expectations

According to estimates released by the U.S. Census Bureau and the Department of Housing and Urban Development, new home sales fell 2.1 percent in November from October’s pace. Despite the dip, sales of newly built, single-family homes are now 16.6 percent above last year’s estimate. And though November’s pace slipped, October’s previously reported rate was revised upward by 30,000, making that month’s pace a post-recession high. August and September’s sales rates were also revised upward by a total of 58,000. With those revisions, November’s rate – while slower than October – still beat economists’ expectations for the month. The new data indicates that the housing recovery is on track and buyers have largely adjusted to higher prices and mortgage rates. The median sales price of new houses sold in November was $270,900; the average sales price was $340,300. There was a 4.3 month supply of new homes available for sale at the end of the month. More here.

Trends Point To Healthy Housing Market in 2014

In 2013, home prices and buyer demand both spiked as the housing recovery took hold in markets across the country. Double-digit increases in home values brought prices to a level last seen in 2004. But, according to Zillow’s November Real Estate Market Report, annual and monthly price trends indicate the robust recovery seen throughout 2013 is beginning to slow to more sustainable levels. The slowing price growth is partly driven by decreasing negative equity rates. As homeowners recoup value lost during the recent recession, more of those homes are put up for sale which increases inventory levels and normalizes price gains. And in addition to an increasing supply of previously owned homes, new home construction is expected to ramp up over the next year, adding further relief to constrained inventory levels across the country. If these trends continue, 2014 will likely see improved for-sale inventory levels, slower price increases, and more potential buyers entering the market to purchase homes. More here.

Existing Home Sales Fall 4.3% In November

Sales of previously owned homes fell 4.3 percent in November, according to estimates from the National Association of Realtors. The drop slowed sales to a pace 1.2 percent below last year’s rate, marking the first time in more than two years that sales were below year-ago levels. Lawrence Yun, NAR’s chief economist, said the market is being squeezed by constrained inventory. According to Yun, there is pent-up demand for owner-occupied housing and, though household formation will inevitably burst out, limited supply is slowing the sales pace. It’s also driving price increases. The national median existing-home price for all housing types was $196,300 in November, up 9.4 percent from last year. Median prices are highest in the West, where the median sales price was $284,400. The Midwest had the lowest median price at $151,100. More here.

Mortgage Demand Stalls As Rates Rise

The Mortgage Bankers Association’s Weekly Applications Survey covers more than 75 percent of all U.S. residential mortgage applications and is a measure of both refinancing and home purchase demand. According to the most recent release, total mortgage loan application volume fell by 5.5 percent last week from one week earlier. Both the Refinance Index and the Purchase Index fell 6 percent from the previous week. Mike Fratantoni, MBA’s vice president of research and economics, said the market index fell to its lowest level in more than a dozen years. According to Fratantoni, purchase and refinance demand dropped due to increasing interest rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances edged up last week, reaching its highest level since September. More here.

New Home Construction Surges, Signals Stronger Economy

According to the U.S. Census Bureau and the Department of Housing and Urban Development, new residential construction spiked 22.7 percent in November and is now nearly 30 percent above last year’s level. The increase was the largest since January 1990 and brought housing starts to a seasonally adjusted annual rate of 1,091,000. Despite the improvement, new home construction remains below historical average. From 1959 through 2000, housing starts averaged 1.5 million per year. Still, with single-family housing starts up 20.8 percent month-over-month and demographics and household formation suggesting more growth, new home construction should continue to improve. The gains were better than economists expected and indicate a strengthening economy. More here.

Builders Optimistic About New Home Sales

All three components of the National Association of Home Builders Housing Market Index improved in December. The three index components, which measure current sales conditions, sales expectations, and traffic of prospective buyers, are scored on a scale where any number above 50 indicates more builders view conditions as good than poor. According to the most recent release, the current-sales component jumped six points to 64, while the index measuring expectations for future sales rose two points to 62 and traffic of prospective buyers increased three points to 44. David Crowe, NAHB’s chief economist, said the recent spike in mortgage rates has not deterred consumers, as rates are still near historically low levels. Crowe believes this month’s gain is due, in part, to the release of pent-up demand caused by the uncertainty surrounding October’s government shutdown. Overall, builder confidence in the market for newly built, single-family homes improved four points to a reading of 58. More here.

Confidence In Economy Slowly Returning

Following the government shutdown in October, Americans’ confidence in the economy tumbled. But ever since that plunge, confidence has been slowly returning. And according to Gallup’s most recent Economic Confidence Index, Americans’ assessment of current economic conditions has almost completely rebounded to levels last seen in mid-September. On the other hand, the index component measuring future outlook, which took a heavier hit during the shutdown, remains 11 points below mid-September levels – though it has recovered 24 points since its post-shutdown low. Gallup’s report says economic confidence should be more positive than negative next year, as long as home and stock prices keep rising and the job market continues to improve. More here.

Americans Cautious But Still Want To Buy

Americans are feeling cautious about their money and the housing market as 2013 comes to an end. Surveyed for Fannie Mae’s November National Housing Survey, nearly two-thirds of Americans said they believe the economy is headed in the wrong direction and that their personal finances will worsen in the next year. Despite the pessimism, however, the housing market is still expected to improve. Doug Duncan, senior vice president and chief economist at Fannie Mae, said caution is the defining feature of Americans’ attitudes toward the economy. In this environment, according to Duncan, the housing market is likely to improve but only at a gradual pace. Still, a majority of Americans said they would buy, rather than rent, if they were to move and 64 percent feel that now is a good time to buy a home. The number of respondents who felt it would be easy for them to obtain a home mortgage rose 4 percentage points to 50 percent. More here.